Ferrosilicon is widely used in the steel industry, foundry industry, magnesium metal production and other industry. These industries are the major users of ferrosilicon that consume more than 90% of ferrosilicon production each year.
At present, the global annual capacity of the ferrosilicon is about 11.1 million tons, and the Chinese capacity is about 8 million tons. China is the world’s largest producer of ferrosilicon. In 2020, the annual output of ferrosilicon in China is 5.3209 million tons, with a slight decrease in output compared with the same period in 2019.
In the global ferrosilicon market, China is not only a big producer but also a big exporter. The import and export of ferrosilicon show the competitiveness and strength of China’s ferrosilicon, and it will also affect the market price of ferrosilicon. According to the overall data of China’s ferrosilicon import and export, China’s ferrosilicon exports have an absolute strength over imports.
Ferrosilicon is the main raw material of iron and steel, and its price is influenced by many factors. The price of related products, national industrial policies, environmental protection policies, etc. will all affect the price of ferrosilicon.
1. The changes in Production Costs
The ferrosilicon production process requires raw materials such as silica, iron raw materials, semi-coke and fuel for electricity consumption. Since ferrosilicon production is an energy-intensive industry, electricity is an important part of ferrosilicon production, and the cost of electricity accounts for more than 60% of the cost of ferrosilicon production, it’s the main component of the production cost of ferrosilicon.
Due to the large proportion of electricity and the immediacy of electricity charges, changes in electricity prices have a more significant impact on output. Under the background of achieving the goal of “carbon emission peaking, carbon neutrality”, various regions have successively implemented power curtailment policies, resulting in unstable power supply and the rise in the cost of electricity prices, The the cost of ferrosilicon production increased, which has a certain impact on the price of ferrosilicon.
2. The Development Model of Midstream Enterprises
At present, there are mainly two development modes for ferrosilicon enterprises. One is an independent production and development enterprise. The raw materials and electricity required by it need to be purchased from outside, and the production of ferrosilicon is exported to the outside world;
The other is to develop as part of the recycling industry. This type of ferro silicon factory is mainly resource-oriented, and the material required for ferrosilicon is provided by the enterprise, which produces ferrosilicon and applies it to the downstream industry chain.
In contrast, the second development model is more efficient and cost-effective.
3. The Demand for Downstream Steel Industry
The market ferro silicon price will also change to the demand of downstream industries, especially the steel industry. The development of the steel industry is affected by the investment cycle of infrastructure construction and related policies.
When many infrastructure projects are in production, the demand for steel increases sharply, ferro silicon in steel making which will drive the price of ferrosilicon to rise; Recently, some regions have implemented measures to stop the production of ferroalloy in some enterprises that exceed the smelting load, which will seriously affect the ferro silicon suppliers, and the demand for ferrosilicon will drop slightly, which will lead to changes in ferrosilicon prices.
4. The Implications of Relevant policy
The relevant national policies will also affect the supply and demand of ferrosilicon, which in turn affects the price of ferrosilicon.
The recent policy of power and production restrictions; on the one hand, the increase in electricity prices brought by the power shortage has increased the production cost of ferrosilicon; On the other hand, the reduction in the production of downstream steel mills has reduced the demand for ferrosilicon, which has resulted in a decrease in both supply and demand of ferrosilicon, which seriously affects the price of ferrosilicon.
However, the above policies are also conducive to strengthening the energy consumption standards of relevant industries, highlighting the competitiveness of advantageous enterprises, and improving the overall strength of the industry.
5. The Main Funds
The main institutional funds have a significant driving effect on the price, and the historic market of ferrosilicon is driven by speculative sentiment and main funds. Due to the continued sharp decline of the “Three Coal Brothers”, the entire black system has suffered a severe setback, and the speculative funds will be withdrawn.